Question

Q1: Payments of $ 670 are being made at the end of each month for 5 years at an interest of 8% compounded monthly. Calculate the Present Value.

Answer 1

The present value is $ 27365.55

Explanation:

Given as :

The amount at end of each month = $ 670

So, The amount for 5 years = 12 × 5 × $ 670 = $ 40200

The rate of interest compounded monthly = 8%

Let The Present value or Principal = P

So, from compounded method

Amount = principal ×
`(1+(Rate)/(100))^(Time)`

Or, $ 40200 = P ×
`(1+(8)/(100))^(5)`

Or, $ 40200 = P ×
`(1.08)^(5)`

or, $ 40200 = P × 1.469

∴ P =
`(40200)/(1.469)`

I.e P = $ 27365.55

Hence The present value is $ 27365.55 Answer